The House Passed a Competitiveness Bill – Now What?
On Feb. 4, months after the Senate passed the U.S. Innovation and Competition Act, the House of Representatives passed their version of a global competitiveness bill, the America COMPETES Act. The bill’s passage occurred as U.S. Commerce Secretary Gina Raimondo reaffirmed the need for expeditious legislative action to combat a persistent semiconductor chip shortage, and a top automotive company became just the latest manufacturer to announce a production pause due to the shortage.
The legislation passed by each chamber would provide up to $52 billion in federal assistance for the domestic production of semiconductor chips over five years. Specifically, these funds would be used to carry out the programs authorized by the CHIPS for America Act, which was included as Title XCIX of the Fiscal Year 2021 National Defense Authorization Act (Pub. L. 116-283). While the funding is necessary to boost domestic semiconductor manufacturing and reduce reliance on foreign trade partners, supply chain strains will persist in the short term and continue to cause tension in the automobile, computing, and other key industry manufacturing areas.
Economists have noted that the chips shortage has been a drag on the entire U.S. economy. In 2021, auto prices were a key contributor to inflation. In December 2021, used car prices rose 3.5 percent while the overall price for all goods and services rose only 0.5 percent. While the tight used car market is more due to slow supply chains than chips shortages, the chip shortages have distorted the market, depressed the economy to the tune of more than $200 billion in lost revenue, and limited the options available to the federal government to alleviate inflation.
While Congress continues to work on finalizing its competitiveness bill, Raimondo announced the conclusions of a request for information on the semiconductor chip supply chain. The results of the September RFI show that chip consumers (e.g. automakers) had less than five days’ inventory of chips in 2021, while demand increased 17 percent from 2019 levels. Because the bulk of factories are already operating at near-total utilization, more factories are needed to satisfy demand.
With the assumption that funding could be arriving soon to begin the programs created under the CHIPS for America Act, Commerce opened a new RFI in January asking industry and academia for advice on how to prepare to best administer the funds and structure associated programs. The “Incentives, Infrastructure, and Research and Development Needs To Support a Strong Domestic Semiconductor Industry” RFI, which closes on March 25, is focused on specific programs authorized by Congress and the workforce development support needed to improve chances that the U.S. semiconductor manufacturing industry will eventually become self-sustaining. Specifically, the RFI asks respondents to address the following initiatives:
- Semiconductor Financial Assistance Program – Will this incentive program to boost production be competitive? How will public and private entities form consortia to qualify?
- National Semiconductor Technology Center – How will this R&D initiative be administered?
- Advanced Packaging Manufacturing Program – Can U.S.-based equipment suppliers lead in packaging?
- Semiconductor Workforce – Does the workforce to meet future needs exist?
Given the perceived urgency and impact on the economy, expect the Biden administration to urge a swift conference process – the mechanism by which the chambers resolve differences in legislation. While the scope of the bills are similar – focused broadly on boosting U.S. economic competitiveness and combatting China’s industrial policy – the House-passed version also includes immigration and climate provisions that Senate Republicans are unlikely to support.
Senate Majority Leader Chuck Schumer (D-NY) has indicated the Senate will soon formally vote to go to conference with informal discussions likely already underway on the committee staff level. To formally begin, the Senate will take up the House-passed legislation, amend it by inserting the Senate-passed legislation, and pass the amended version, sending it back to the House and marking the beginning of the conference. Like the drafting of the bills, the conference process will likely be driven primarily by party leadership with input from relevant committees. Democratic leaders in both chambers want to complete the legislation as soon as possible for Biden’s signature as Congress heads into the midterm elections.
In the meantime, entities poised to benefit from increased microelectronics spending, either in transportation and logistics, research and development, or various workforce initiatives should review the Department of Commerce’s recent actions and consider contributing their thought leadership to the discussion.
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